Ron Shaich built two unicorns in the food industry – Panera and Au Bon Pain. His life and new book, Know What Matters, offers 7 lessons that can help entrepreneurs develop their own lean unicorns.
#1. Start with Passion.
Entrepreneurs need passion because passion fosters persistence. Shaich found his in the fast-casual food industry. His first job was in the cookie industry and his first venture was a Boston cookie shop that he started in 1981 when he was 28 years old. When he realized that few people buy cookies before noon, he pivoted and became a licensee of Au Bon Pain, a 3-store French bread chain. When he realized that he could improve the management of Au Bon Pain, he merged with the licensor, got 60% of the combined entity, and built Au Bon Pain into a national chain of 250 stores. He then acquired the St. Louis Bread Company and used its business model to create and build Panera Bread into a giant with annual sales exceeding $5 billion. Find your passion. Pursue your passion.
#2. Get Skills.
Passion is good but not enough. You need skills. By graduating from Harvard Business School and working in the cookie industry before starting his own venture, Shaich was well prepared to start his own cookie venture. He used his business skills to license products and expand his offering, merging with the licensor who could benefit from better management, and building the merged entity, Au Bon Pain, into a national chain. He then used acquisition skills to buy and build Panera, Shaich also demonstrated the skills to find and implement the growth strategy in an emerging trend where few succeed.
#3. Find your Emerging Trend.
Billion-dollar entrepreneurs, from Sam Walton to Brian Chesky and Joe Martin, mainly started in emerging industries. The fast-casual food industry started in the early 1990s and boomed in the 2000s. Shaich entered the emerging trend when Au Bon Pain bought the St. Louis Bread Company in 1993, became Panera in 1997 and expanded. As Shaich notes, “the job of leadership is to figure out where the world is going and make sure your organization is there.” Jump on the right emerging trends.
#4. Finance for Control.
Shaich financed and built Panera with control. When he merged his cookie company with Au Bon Pain, he kept 60% of the combined entity. When he bought the St. Louis Bread Company, he paid $23 million and stayed in control. That is one reason he was able to mold Panera in his vision and keep the lion’s share of the wealth created.
#5. Grow with Cash Flow.
Shaich notes that the managers of Au Bon Pain, when he was a licensee of the company, did not always bill him for the license fee because they were “out of control.” Shaich obviously did not make that mistake. By monitoring his growth, he built Panera and controlled it.
#6. Exit at the Right Time with the Right Strategy.
Know how to exit and when. Shaich considered selling Panera to McDonald’s and Starbucks. Neither worked out. McDonald’s was on an acquisition spree, but many of its acquisitions did not work out or did not fit, and were divested. Shaich made the right decision in not selling to McDonald’s. Shaich also discusses the problems with going public before the venture is ready. In their search for returns, VCs push their ventures to go public as soon as possible, especially if the stock market is hot. That is one reason why many ventures that are taken public prematurely often end up failing as SPACs have proved. Managing a failing venture with public investors is not simple – but VCs are fine with it since they sell their interests as soon as they can.
#7. Build the Right Team.
Shaich is always on the lookout for talented individuals whose objectives align with his own. When activist investor Noah Elbogen was on Panera’s board, disagreements arose between Shaich and Elbogen. However, when Elbogen launched his own investment venture, Shaich recognized his talent and invited him to join forces. It’s all about pairing the right talent with the perfect role.
MY TAKE: Shaich follows many of the fundamental guiding principles of billion-dollar entrepreneurs. Learn these common rules and apply them to your business to build your lean unicorn.
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